This article was updated on 17th February 2021.

On Monday 27th April the government announced the Bounce Back Loan Scheme. Here are the key details that have been shared with us so far. You can also watch my video for the highlights.

What is the Bounce Back Loan Scheme?

The bounce-back loan scheme is providing loans to businesses with a 100% government-backed guarantee for lenders.  It is designed to provide smoother access to cash for small companies facing difficulty accessing existing government-backed lending.

How much can the company borrow?

Businesses will be able to borrow up to 25% of turnover, between £2,000 and £50,000.

What is the borrowing cost?

The government will pay any fees and interest for the first 12 months, making the loan interest-free for business for the first 12 months. The government is working with lenders to agree on a low standardised level of interest for the remaining period of the loan.

What is the term of the loan?

Originally up to 6 years with the option to extend to 10 years under the Pay as You Grow Scheme.

What are the eligibility criteria for this loan?

When applying for the loan you are required to confirm if your business:
– is based in the UK
– has been negatively affected by the coronavirus
– is not in bankruptcy, liquidation or undergoing debt restructuring
– was a “business in difficulty” on 31 December 2019
Applicants are required to self-declare they meet the eligibility criteria for the Scheme. Eligible companies will be subject to standard customer fraud, Anti-Money Laundering (AML), and Know Your Customer (KYC) checks.

What is the definition of a “business in difficulty” on 31 December 2019?

There are five criteria, with the key one (per the British Business Banking Association) which applies to limited companies being:
– Limited companies which have accumulated losses greater than half of their share capital in their last annual accounts (this does not apply to SMEs less than 3 years old)
Please refer to your lender’s website for further details on this definition.

Can companies access this funding in addition to the CBILS scheme?

Businesses can not apply for bounce-back loans when also applying for CBILS or have already entered into a CBIL arrangement.

What if I already have a CBILS agreement for up to £50,000?

If you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender until 4 November 2020.

When will repayments be due?

No repayments will be due during the first 12 months. Under the Pay as You Grow Scheme repayments can be paused entirely for 6 months and a business can opt to make interest-only payments for 6 months on up to 3 occasions.

What is the interest rate post the initial 12 month period?


Are there any fees for early repayment?

No. Early repayment is allowed, without any early repayment fees.

Will companies only be able to apply for this with the lender their business banking is held with?

Currently lenders are mainly only accepting (or prioritising) applications from their own customers.  
11 lenders are currently accredited to provide these loans, with other lenders expected to become accredited over time.
BOS, Barclays, Clydesdale and Yorkshire, Danske Bank, HSBC, Lloyds, NatWest, Santander, RBS, TSB, Ulster Bank.

How do I apply?

Online through a short, standardised online application.

Is any personal guarantee required?

No.  Lenders are not permitted to take personal guarantees or take recovery action over a borrower’s personal assets (such as their main home or personal vehicle).

How long is the scheme open for?

Until 4 November 2020 but the government retains the right to extend this.

If my loan is accepted, when will I receive the money?

Current feedback since the scheme went live on 4th May is that borrowers are seeing different timings, depending on the lender and their processes.
The scheme has been launched on the basis any agreed loan should reach businesses within days, potentially even within 24hrs.

What other points should I, as director of the business, consider when deciding if to apply for a bounce back loan?

When entering into a loan arrangement you need to ensure the business will be able to meet any repayment obligations.
As advised in our recent webinar and blog, any decisions made regarding the Bounce Back Loan Scheme should always be documented to ensure the full decision making process is clear and understood if ever required in the future.

What can the loan be used for?

The business must confirm to the lender that the loan will only be used to provide an economic benefit to the business, for example providing working capital, and not for personal purposes.

When can I apply?

Applications will launch from Monday 4 May and businesses will be able to access these loans through a network of accredited lenders.

Where to go to for more help?

Get in touch if you would like assistance in making a bounce back loan application.